The Ignorant Investor

The market has been on a long downward slope. Almost 20% off the highs the last time I checked. Going by the total returns on my list of ETFs, bonds have outperformed the S&P500 since Jan. 2006. For the past couple of months, the only big winners on my list have been emerging markets, gold, and commodities.

The decoupling between these three markets and the rest of the stock market doesn't make much sense. If the economy is tanking and we head into a recession, demand for commodities will drop as will demand for products made in emerging markets. Gold is an excellent hedge against inflation, but there's a point where its value grows beyond any reasonable connection with fiat currency. I'm thinking maybe it's time to lock in gains and sell a little, but the Fed's making me nervous. Not a lot of interest in a strong dollar in D.C. if it means raising rates and/or raising taxes to reduce the deficit.

There's been a lot of big moves up in the market. They've come out of the blue, but the gains have dribbled away gradually following the initial spurt of enthusiasm. I'm guessing that Wall Street can't figure out how many more highly leveraged funds or banks will tank, or whether the economy will come roaring back with more cheap money.

At some point, there will be a change in direction. It will come long before the economic statistics confirm improvement in the economy. Right now, Wall Street looks like it can't make up its mind on whether we'll have a short recession or a long one.